Revised EU guidance on market definition: key points for technology and other “innovative” sectors | JD Supra

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• After more than 25 years, the European Commission (“Commission”) has revised the guidelines on market definition in antitrust investigations and merger control. The new directives, in particular, reflect developments related to digitalisation.
• Here are the main entries related to technology and other innovative industries:
  • Guidance on market definition for multi-faceted platforms (such as social networking platforms or online marketplaces) and digital ecosystems (such as a mobile operating system and the products built around it, including hardware, app stores, and applications);
  • Emphasize that markets can be defined around pipeline products or otherwise included, i.e., that those products are not only relevant for assessing competitive dynamics;
  • Guidance on evaluating the future”Structural changes in the market“(For example, industry change to new technologies or medicines, or national regulatory developments);
  • Examples of evidence, other than the SSNIP test (small but significant non-transient increase in price), to assess market shares of products sold atZero cash price“or”creative” products.
• If the investigating parties fail to convince the Commission of its market definition, they should ensure that the competitive constraints identified in the market definition are taken into account in the Commission’s competitive assessment.

Revised Committee guidance on definition of “Related marketsIn Antitrust and Merger Control Investigations (“Guidance”)¹ Aiming to increasecertainly” And “Predictability“For companies and their advisors given the degree of business and legal developments since the first Directive in 1997. Below we present the key points from the perspective of technology and other innovative sectors.

Identify relevant markets inInnovative industries“

The guidance recognizes that there is “Innovative industries” Is characterized by “Frequent and significant research and development“This is not only about assessing competitive dynamics, but also identifying the relevant market,” he notes.

The guidance focuses on pipeline products as an example. In particular, while pipeline products are (by definition) not available to customers, the Commission is of the view that “There may be sufficient visibility into their R&D process to identify other product(s) for which the pipeline product is potentially substitutable, if development of the pipeline product is successfully completed and the product is brought to market“.² Specifically, the Commission considers that pipeline products belong to a market with “Current products“Where the pipeline product has the same intended use as the products already being marketed, or to”New market“Includes the pipeline product and its substitutes where competitors develop the same or similar pipeline products.³

The Committee notes that the geographic market reflects “The geographic dimension of basic R&D efforts“.⁴ This is illustrated by the Committee’s approach to the pharmaceutical industry where R&D is typically considered global. Accordingly, the geographical markets for pipeline products have been identified as global or at least at EEA level.⁵

Versatile platforms

The guide has a new section dedicated to “Versatile platforms“, that is, platforms that bring together two or more separate groups (such as consumers and advertisers on social networking platforms, or buyers and sellers in online marketplaces) and facilitate interactions between these groups. Examples of platforms include app stores, hotel booking platforms, social networking services, food delivery platforms, and card systems. paying off.

The multifaceted nature of platforms means that product substitution on the demand side can be evaluated for more than one customer group and that demand from one group of users can influence demand from another (“Indirect network effectsSome challenges to market definition include assessing the strength of indirect network effects and analyzing the impact of pricing on demand.

According to the guidance, the Committee focuses on differences in “Replacement possibilities“On different sides of the platform.⁶ Factors influencing the panel’s evaluation include product differentiation on each aspect, the nature of the platform and behavioral factors such as user group decisions (i.e. the choices users make about which platform they will use or ‘home’ on). Depending on the facts of the case, the Authority may define a single product market that includes multiple user groups, or separate but interconnected product markets for each aspect of the platform.⁷

Digital ecosystems

According to the guidance, digital ecosystems “They can, in certain circumstances, be considered to be composed of a primary primary product and several secondary (digital) products whose consumption is linked to the primary product, for example, by technological links or interoperability.“.⁸ The guide provides an example of a mobile operating system and the products built around it, including hardware, the app store, and apps.

The Authority may apply the analytical framework for after-sales markets to the definition of a market, that is, the purchase or use of one product (primary product) leads to the purchase or use of another product (secondary product). particularly:

1. When determining markets for primary and secondary products, the Authority takes into account competitive constraints from other related markets;
2. Markets can be defined as follows:
   • a “System market“Primary and secondary products include;
   • A market for the primary product with separate markets for secondary products associated with each brand of the primary product;
   • “Double“Or separate markets for primary and secondary products.

identification “System market“It is more appropriate when there are only a few suppliers who specialize in the by-product(s).⁹ The importance of dual or multiple markets depends primarily on the degree of substitutability between secondary products of different suppliers, for example, if secondary products from different suppliers are compatible with all or most of the primary products, the definition of dual markets may be appropriate.¹⁰ The Authority may also assess whether product groups existing in digital ecosystems constitute relevant markets.¹¹

Note that not all ecosystems are suitable for the aftermarket or “Package market“, the Commission also takes into account the following when defining markets for digital ecosystems: network effects, switching costs (including factors capable of causing customer lock-in) and routing decisions (single or multiple).

account “Zero price” Stock market

The guidance acknowledges that the SSNIP test traditionally used to identify markets may not be appropriate for products supplied at a price “Zero cash price“Or innovative products. In such circumstances,”Other types of evidence” considered as “Equally valid“.¹² The Commission confirms that metrics other than sales or purchases may be used to determine market shares such as number of active users, website visits, streams, time spent, audience numbers, downloads and updates, interactions, or volume or value of transactions executed via a platform. .¹³

The importance of future developments

The Guidance also addresses the impact of future developments on market definition, i.e. structural market developments that affect the overall dynamics of market supply and demand. Such shifts could be linked to the potential emergence of new types of products – new technologies that would change the business model of an industry, or new medicines that would change the way a disease is treated – or (national) regulatory developments that would impact, e.g. The geographic scope of the market.

The Committee acknowledges that “thisStructural changes“They may be taken into account in antitrust cases under very specific circumstances, but it emphasizes that these factors primarily impact merger investigations (which involve a degree of…Staring into the crystal ball“) if there was “Enough probability“Changes will come in”reasonable“Time frame.¹⁴ On the other side, “Just assumptionsThe fact that a certain trend will continue or that market players will change their behaviors is not enough for the Committee to take these developments into account.¹⁵

The Committee relies on the parties’ internal documents to assess the likelihood of alleged future developments. Developments seen as potential in internal documents prepared independently of the deal carry more weight than changes presented in the context of the call, and conversely, the committee is less likely to consider new technologies or business models that are considered unrealistic in internal documents. .

Footnotes

¹ OJ C, C/2024/1645, 22.2.2024, ELI: http://data.europa.eu/eli/C/2024/1645/oj.

² See paragraph. 91 of guidance.

³ See paragraph. 91 of guidance. For example, in the case of M.7275 Novartis/GlaxoSmithKline Oncology BusinessParagraphs. 23-31, the Committee included pipeline products in its analysis of the current targeted therapeutics market for the treatment of advanced melanoma, in the case M.9461 AbbVie/AllerganParagraphs. 48-54, the committee identified a market limited to IL-23 inhibitors for the treatment of ulcerative colitis and Crohn’s disease (which were in development at the time) even though they were not yet on the market.

⁴ See paragraph. 91 of guidance.

⁵ See for example case M.7275 Novartis/GSK Oncology, Paragraph. 32.

⁶ See paragraph. 95 of guidance.

⁷ For example, in the case of M.8124 Microsoft/LinkedInParagraphs. 126 et seq., The Authority has identified one market for online employment services, which includes job seekers on the one hand and recruiters on the other. This relied on online recruitment solution providers maintaining databases of profiles and CVs for the use of both groups (job seekers and recruiters), thus creating a system by which groups could be matched according to mutually defined criteria. Conversely, in the case of AT.34579 MasterCard Internet./Europe, Paragraphs. 283 et seq., the Commission identified the issuance and acquisition aspects of the payment card systems market as distinct product markets because the acquisition services provided to merchants wishing to accept payment cards differ substantially from the issuance services provided to card users in terms of characteristics, pricing structure, and competitive dynamics.

⁸ See paragraph. 104 of guidance.

⁹ See paragraph. 101 of guidance.

¹⁰ See paragraph. 102 of guidance.

¹¹ See paragraph. 104 of guidance.

¹² See paragraph. 31 of Al-Huda.

¹³ See for example cases AT.39740 Google Search (Shopping), Paragraph. 159, M.4731 Google/DoubleClick, Paragraph. 46 and M.7217 Facebook/WhatsApp, Paragraph. 77.

¹⁴ For example, in the ruling of January 30, 2020, Generic medicines (UK) and others, C-307/18, EU:C:2020:52, the European Court of Justice confirmed that the future entry of generic medicines affects the definition of the market because manufacturers of generic medicines have taken the necessary regulatory and commercial steps to enter the market when the patents protecting the originator medicine expire. In case M.7724 ASL/ArianspaceThe authority gave weight to the market transition resulting from the launch of reusable space launchers, considering that customers were optimistic about it even though the concept had not yet been successfully tested.

¹⁵ See paragraph. 21 of guidance.